Annual Results for FY2018
May 10, 2019
TOKAI Holdings Corporation(Securities Code: 3167)

Summary of FY2018
and points of FY2019

Katsuhiko Tokita
President & CEO
TOKAI Holdings Corporation1

Key Points of FY2018 Financial Results
Operating activities in LPG business progressed extremely well, apart from the effects ofhigh temperatures and rising procurement cost.

The customer count (earnings base) increased by 26,000 (+0.9%)
from the beginning of the fiscal year
– The customer count at the end of the current term was 2.9 million, an increase of 26,000 (up0.9%) from 2.88 million at the beginning of the fiscal year.
– LPG, CATV, and Aqua(bottled drinking water delivery) businesses enjoyed a steady customer
acquisition, mainstay business driving the expansion of earnings base.

Customer base expansion strategy taken in the previous period succeeded
in a v-shaped recovery and recorded the highest business results ever
– Sales of our core businesses, gas, information & telecommunications, and CATV, increased due tothe expansion of customer base and the effects of M&A carried out in the previous fiscal year andrecorded the highest results ever.
– Despite the impact of high temperatures on LPG sales and a rise in LPG procurement cost, profits
achieved a double-digit growth due to an increase in the number of monthly fee-paying services
accompanying expansion of customer base. As a result, all profit items marked record highs.

2Results of M&A in FY2018

3

First step in wide-area development of gas business
In April 2018, a contract was concluded on the transfer of a gas business operated by Shimonitamachi, Gunma Prefecture, and the business transfer was approved by the Kanto Bureau of Economy,
Trade and Industry in October. Business succession is scheduled in April 2019.
Took a first step in wide-area development and expansion of operation in the city gas business.

Conclusion of contract on transfer of
Shimonita-machi gas businessObtained approval for business transfer inOctober 2018
Business succession started in April 2019

GunmaPrefecture

Shimonita-machi(Gunma Prefecture)

Shizuoka Prefecture

Wide-area development and expansion of operation in city gas
4business

Steady progress in wide-area development of city gas business
In March 2019, acquired preferential negotiation rights on a gas business operated by Nikaho-shi,
Akita Prefecture, and scheduled to succeed the business in April 2020.
This will be the 2nd M&A case in the city gas business as a Group's first entry into Akita Prefecture.
Based on the Group's TLC (Total Life Concierge) vision, we will also provide a variety of life-related
services in order to contribute to the realization of a more affluent lifestyle.

“Total Life Concierge”
AomoriPrefecture

AkitaPrefecture

City gas

LP gas

Iwate
Prefecture

Providing various
services of our Group

EnergyElectricity

RenewableenergyInformation &communications
InternetBudget mobileservices

ＣＡＴＶ

Realizing affluent
lifestyles
Nikahoshi

ResidentialFacilities
Renovation

Security

Insurance

Security

Healthcare

Selected as a preferred negotiator for the transfer of Nikaho-shi
gas business in March 2019.
Business succession scheduled in April 2020.

Facilityequipment

Aqua
Agriculture

Medicalcare

Nursingcare

Education

5

The continuing customer count expected to increase by 2.5
times through promotion of TLC
A cross-selling rate of city gas business in Shizuoka Prefecture is much higher at 63.0% than that of thewhole Group, which is 17.8%, showing that the city gas business deeply associated with communities is
optimal for the promotion of TLC.
In Shimonita-machi, where a business is already launched, the continuing customer count per month is also
expected to increase by 2.5 times through active promotion of TLC

Cross-selling rate: 17.8%(for the entire Group)

Active promotionof TLC

Nikahoshi

Cross-selling rate of city gas businessin Shizuoka Prefecture is as high as
63.0%.
City gas business deeply associatedwith communities is a base businessfor TLC with a high cross-selling rate.

Shimonitamachi

63.0%
The continuing customer count permonth multiplies by 2.5 times 6City gas

Creating synergies in Information & Communications
Consolidation of a subsidiary, "CYZE Inc.", whose main business is provision and developmentof survey systems
Signed a capital and business alliance agreement with "Tripleize Co., Ltd.", which offers
strengths in advanced technology areas such as AI, IoT and blockchains.
Mutually combine strengths to create synergy effects, and further expand and enhance theGroup's Information & Communications business.

[Strengths/Areas]
In-house developed surveysystems
Custom-made support
based on highly scalable
in-house developedsystems

M&A[Strengths/Areas]
Internet service
Data center operationservice
System development

Capitaltie-up[Strengths/Areas]
Advanced technologies
such as AI, IoT andblockchain

Mutually combine strengths to create synergy effects
Further expansion and enhancement of the Group's
Information & Communications business

7

Summary of FY2018
We were able to make steady progress toward FY2020 as a turning point for
further growth.

(i) Steady expansion of the earnings
base, including M&As

(ii) Achievement of a v-shaped recovery
with the record high profits
8

Point of FY2019

9Establish a full-scale profit growth phase
Achieve record profits for the 2nd consecutive period and establish a full-scale profit
growth phase, leading to the final year of IP20 "JUMP" (FY2020).
We will continue to increase our customer base, promote M&As to expand ourbusiness area, and advance into new overseas bases.
In FY2019, sales of 200.8 billion yen, operating profit of 14.2 billion yen, and thenumber of customers of 3 million are expected to be achieved.
(Unit: JPY 100 MM)

FY2017FY2018FY2019ResultResultForecast

1,8611,916

2,008

Operating profit

110131

142

Customer count(Unit: 10,000)

288

290

300

Sales

10

Progress in development of "ABCIR+S" strategy*
In addition to the sales capabilities cultivated since our founding, a focus on the expansion ofclient base, enhancement of competitiveness, and development of new services based on"ABCIR+S" becomes the future key strategy.
Strengthen the structure of a dedicated organization, "Next Generation Business Strategy
HQ", and promote the development of "Digital Marketing Platform".
(Concept of ABCIR+S)

Salescapabilities(Existing strengths)* Our unique term is coined to denote A (AI), B (Big Data), C (Cloud), I (IoT), R(Robotics)+S (Smartphone).Our Group's Innovation StrategyFocus on “Expansion of new client base”, “Enhancement of competitiveness”, and“Development of new services”

Strengthen the structure of a dedicated organization, "Next Generation Business Strategy HQ",
11and promote the development of "Digital Marketing Platform"

Approaching customers by "Digital Marketing"
Digital Marketing Platform develops trends of individuals by integrating data from our Group'scustomer database and web browsing information on a customer basis.
Based on this information, efficiency and competitiveness are improved on our activities forsales and prevention of cancellation.

Functionalenhancement

New marketing
technique:Web browsing
information
Each service
Websites

Digital Marketing
Platform

CustomerDB

Match customer
information

Our GroupCustomers

TLC smartphoneapp

Grasp individual trends (taste and preferences, any sign of cancellation, etc.)

Improve efficiency and competitiveness of our activities
on sales and prevention of cancellation

12

Progress of M&A investment plan13

Results of M&As
M&As carried out on 5 companies in total: 2 CATV companies (Tokyo Bay
Network and TV Tsuyama) in FY2017; public gas operation in 2 municipalities(Shimonita-machi and Nikaho-shi) and CYZE Inc. in FY2018
AkitaCity Gas

City Gas

Shimonitamachi gasbusiness

Nikaho-shi gas businessBusiness transfer: April 2019

Business transfer: April 2020

CATVTV Tsuyama
Gunma

Acquisition: February 2018

CATVTokyo

Tokyo Bay Network
Acquisition: July 2017

Okayama

Information &Telecommunications
CYZE
Acquisition: September 2018

Points of Financial statementof FY201914

Net increase of customer count by 26,000 fromthe beginning of the fiscal year
The number of customers for continued service at the end of the current term was 2,902
thousand, an increase of 26,000 from 2,876 thousand at the beginning of the fiscal year.
Our core businesses in LPG, CATV, and Aqua led the expansion of earnings base.
(Net increase in customer numbers in 1,000)+31+22+24+10+26+19+11+8+2
LPG

CATV

FY2016 (Period before the previous year)*Excluding a customer increase by M&AsAqua

FY2017 (Previous period)

FY2018 (Current period)

16V-shaped recovery and record profits in all items
Sales rose to a record high due to an increase in the number of customers and the effects of M&A in
the previous fiscal year.
Operating profit also grew by double-digit due to an increase in the number of monthly fee-based
services accompanying expansion of client base and reduction in customer acquisition cost andother initial costs. As a result, it reached a record high for the first time in 2 years.
Apart from the effects of high temperatures and soaring LPG purchasing cost, the operating
activities are progressing steadily in line with the business forecast.
(Sales and profits: Millions of yen; EPS: Yen)

FY03/18
Results

FY03/17
Results

InitialForecasts

YoY
ChangeVersus forecast
Percent
ChangeChangePercent
Change191,600 186,069 195,600 +5,530+3.0-4,000-2.0

Operating profit

13,057 10,971 13,960 +2,086+19.0-903-6.5

Recurring profit

13,259 11,191 13,880 +2,068

+18.5

-621

-4.5

Net income

7,772

6,620

7,920 +1,151+17.4

-148

-1.9

EPS (Yen)

59.36

51.19

60.48

+16.0

-1.12

-1.9

Sales

+8.17

17Substantial increase in the number of monthly
fee-paying services of core businesses
By expanding the number of customers (earnings base), increase in the numberof monthly fee-paying services leads to increase in earnings.
No. of monthly feebased services(Unit: 1,000 cases)

10,366

6,073

3,913
3,753

9,579
2.33 million (up 28.9%)

320,000 (up 5.5%)
5,858

730,000 (up 23.0%)
8,041

5,756

FY2016FY2017FY2018FY2016LPG

3,182

FY2017FY2018FY2016FY2017FY2018Hikari (Optical)
Collaboration

CATV

18

Points on a double-digit growth of operating profit
Profit from operating activities increased by 4.5 billion yen. Resulting from expansion incustomer count, profits rose by 3.4 billion yen due to an increase in the number of monthly
fee-paying services and 200 million yen in LIBMO.
On the other hand, non-operating factors, such as high temperatures and rising purchasing
costs totaling 2.4 billion yen negatively impacted.

Result of sales activities

Non-operating factors

Growth factors (millionyen)

Initial cost and otherfactors (million yen)
Factors due tocustomer acquisition
cost, etc. (million yen)
Factors due to nonoperating activities(million yen)

Customercount
2.88 million

11.0FY2017
Result-0.6+0.2+0.9

CommunicationMVNO

Customeracquisition/retention cost

+0.2+0.9

LIBMO

billion yen

+3.4

146

Impact of hightemperatures
Gas-1.8-0.6

2.9 million

billion yen

billion yen

Impact ofpurchase cost

Increase in customer numbers,etc.
Gas+0.8 billion yen

CATV+1.4 billion yen

Hikari (Optical)
Collaboration
Communication
corp.

+0.2 billion yen

Aqua+0.5 billion yen

Renovation+0.2 billion yen

CustomercountGas

13.1-1.8 billion yen+0.3 billion yen

FY2018Result19

Development of growth investments based onstronger capital base
Equity ratio improved further by 1.1 points.
While operating profit increased and income taxes were reduced, the ratio ofinterest-bearing debt to EBITDA improved to 1.8 times, despite the decline infree cash flow from the previous fiscal year due to active growth investments.
Equity ratio

36.3

％

End of March 2018

Interest-bearing debt balance

51.0

billion yen

End of March 2018

Operating cash flow

20.9

billion yen

End of March 2018

Investing cash flow

-11.5

billion yen

End of March 2018Free cash flow

9.4

billion yen

End of March 2018

Interest-bearing debt/EBITDA ratio

1.9

times

End of March 2018

➡ 37.4➡ 50.6％End of March 2019billionyen

End of March 2019billionyen➡ 21.6➡ -12.4

End of March 2019billionyen
End of March 2019billionyen

➡

9.2

➡

1.8

End of March 2019times

End of March 2019

Points of Business Performance
forecast in FY 201920

Customer count reach 3 million withnet increase by 100 thousand
By the end of FY2019, it is expected to reach 3,002 thousand with a net increase of 100
thousand from 2,902 thousand as of the end of FY2018.
In particular, a net increase in LPG will be focused, while CATV and Aqua are expected to see(Unit: 1,000 cases)
a net increase on par with the previous year.
2015
Result2016
Result2017
Result2018
Result

2019
Plan

634

642

661

684

745

Conventional ISP, etc.

633

527

465

419

384

Hikari (Optical)
Collaboration

219

299

323

327

345

LIBMO

－2

29

41

62

Mobile

236

233

227

217

212

1,088

1,061

1,044

1,004

1,003

CATV

710

733

1,032

1,063

1,090

Aqua

133

135

146

156

167

Security

18

17

17

17

17

2,558

2,5642,876

2,902

3,002

Information &communications

Gas (LPG & City Gas)

SubtotalTotal* Figures are rounded to the nearest 10,000. Duplication of communication services between
Information & Communications and CATV is excluded from the total.

22

Achievement of record profits for the 2nd consecutive
year aiming at a further growth
The plan aims to ensure a great leap towards FY2020, which is a final year of themedium-term plan, by achieving record profits for the 2nd consecutive year following
FY2018 and entering a full-scale profit growth period.
We will continue to increase our client base, promote M&As to expand our businessareas, and advance into new overseas bases.
(Unit: million yen)

Forecast on
Result ofCurrent Period Previous Period(FY2019)(FY2018)

Year on YearChanges

(%)

Sales

200,800

191,600+9,200+4.8%

Operating profit

14,17013,057+1,113+8.5%

Ordinary income

14,04013,259+781+5.9%

Net income

8,230

7,772+458+5.9%

62.85 yen

59.36 yen

+ 3.49 yen+5.9%

Net income pershare

23

Progress in IP20 "JUMP"In FY2018, 13.1 billion yen operating profit was achieved, marking a record high by a v-shaped
recovery.
In FY2019, we will achieve record profits for the 2nd consecutive period and enter a full-scale growthphase.
Compared with the IP20 JUMP, a purchase price of LPG has deviated from the initial estimate byaround 2 billion yen since FY2018, otherwise, other items are generally progressing well.
(Operating profit in JPY 100 MM)
Result/Forecast

162

Medium-Term Plan IP20 "JUMP"
Deviation in LPG purchase price from theinitial estimate-19140

142

131

128

-26114FY2016110

FY2017FY2018FY2019 (Forecast)

24

Strive for continuous and stable dividends
Based on our corporate dividend policy, which calls for continuous and stabledividends, the annual dividends are planned to be 28 yen per share.
28 yen per 28 yen per 28 yen per
30

share

share

share

per share

141414141414

FY2017FY2018FY2019(Forecast)

625

20

14 yen per
1528 yen

12 yen per 12 yen per 12 yen per 12 yen per
share

share

share

share

666610share

11811566666

FY2011FY2012FY2013

FY2014FY20150Interim dividends

Year-end dividends

FY2016

Commemorative dividends

25

Prospect of business performance and future outlook described in this material are ourestimation based on information available as of this moment, and potential risk anduncertainties are included. Therefore, please note that actual business performance ispossibly very different from the described future outlook due to change of various factors.

For inquiry related to this material, please contact us as follows:
IR Office, TOKAI Holdings Corporation
11F Hamarikyu Intercity, Kaigan 1-9-1, Minato-ku, Tokyo 105-0022
TEL: (03)5404-2891
FAX: (03)5404-2786
http://tokaiholdings.co.jp
e-mail: overseas_ir@tokaigroup.co.jp

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